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Friday, April 17, 2009

The Market is Recovering

Two years ago it was obvious to a lot of us that the market was held up solely by Wall Street's hot air, the unrealistically limitless expectations of the public, and unprecedented phantom value (a record % of our economy consisting of financials, most notably derivatives, & most notably credit default swaps which- before they blew up -comprised nearly $40 tril. of the global economy!)The scariest fact about the current economy is that the US debt to GDP chart looks like a hockey stick. The only other time in our history it has been that high was just before the Great Depression. But here's a link to the most skeptical article about that:http://www.businessinsider.com/2009/2/us-debt-levels-are-fine-debt-to-gdp-chart-is-wrong-and-meaninglessIf the chart is so "wrong and meaningless" why is it correlated with economic debacle?The second fact is price/earnings ratios. Here's another contrarian article:http://moneynews.newsmax.com/michael_carr/michael_carr/2009/02/26/185905.htmlThe bump up in recent quarterly earnings is not from sales in most cases. It's from expense reductions and accounting magic as overpaid "managements" attempt to justify their existence. Layoffs are one short term strategy being used to the hilt.Which leads us to the 3rd factor; unemployment. We have yet to feel the multiplier effects of this job decimation. Who is going to buy all the stuff? Who is going to make all the stuff to buy? See the most recent report at: http://www.bls.gov/news.release/pdf/empsit.pdfNo one has given me any evidence that the market will not seek new bottoms. Soon. And there is plenty of evidence that it will. But I could be wrong.So, regardless, wouldn't it make sense to eliminate risk of loss without missing out on market recovery if I'm wrong and it indeed happens? Most folks don't even know that it's possible to do that, much less how easy it is.